Taxi Cab Lenders Lose Suit Over Ride-Sharing

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Four credit unions that provide financing to New York City’s iconic yellow cabs have lost a legal challenge to city regulations that allow ride-sharing services such as Uber to pick up passengers who “hail” them.

The unions argued that medallions issued by the city give taxi drivers the exclusive right to respond to street hails. According to the unions, competition from Uber and similar companies has caused the value of medallions to plummet as much as 40% in recent months, exposing lenders to loan losses.

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The medallions are security for nearly $2.5 billion in loans that the credit unions have made to taxi medallion owners.

But Queens Supreme Court Justice Allan B. Weiss ruled Wednesday that for-hire vehicles could use electronic hails to compete with yellow cabs, finding it was within the city’s authority to treat the electronic communications between a passenger and a ride-sharing service as a “prearrangement” rather than a street hail.

“It is not the court’s function to adjust the competing political and economic interests disturbed by the introduction of Uber-type apps,” he wrote.

The number of medallions is limited by the city and they sell for very high prices — as much as $1 million as recently as 2011, according to Reuters. The credit unions have warned of a slew of loan defaults if owners stop making payments on medallions that don’t generate enough income for them to repay their debts.

One of the lenders, Melrose Credit Union, said it has nearly $400 million in delinquencies and troubled debt restructurings in its medallion loan portfolio. The other plaintiffs in the case are Montauk Credit Union, Progressive Credit Union, and Lomto Credit Union.

“A catastrophe is unfolding, as an entire industry continues to be illegally destroyed,” an attorney for the unions said.

But a lawyer for the city said it had “acted appropriately in its regulatory approach to this technological innovation — electronic apps for dispatch in the for-hire vehicles — which are separate and distinct from traditional street hails.”